What Are Fraudulent LLC Transfers?

Establishing a limited liability company for asset protection planning is a common goal for a person who is meeting with an attorney for the first time to accomplish this, however, you must be aware of the fraudulent transfers exception.

Any asset protection plan developed must consider the potential application of fraudulent transfer laws. These laws were enacted and put in place to prevent people from transferring assets for the primary purpose of trying to defraud creditors. In the event that a court identifies that an asset transfer is fraudulent, that transfer is voided and that asset is then exposed to the claims of the creditors.

Remember that fraudulent transfer laws vary from one state to another and are also outlined in the Internal Revenue Code and the US Bankruptcy Code.

Three key questions should be answered by you and your asset protection planning attorney when it comes to fraudulent transfer laws. These include:

Did the transferring party intend to delay, hinder or defraud a creditor at the time the transfer was initiated?

Was the transferring party financially solvent at the time of the transfer?

Was the transfer made in exchange for equivalent consideration?

Indications of fraudulent intent can include concealing the transfer, transferring nearly all of a client’s assets, retaining possession or control of the transferred property, transferring assets under the threat of litigation or receiving inadequate consideration from the transferee.

If you have further questions about how to protect your assets and use a comprehensive asset protection plan, schedule a consultation with an attorney today to walk through what’s recommended for you.